updated 09:15 am EST, Thu January 27, 2011

Lenovo and NEC merge PC, tablet plans in Japan

Lenovo and NEC on Thursday confirmed a rumored deal to merge their PC businesses in Japan. The resulting NEC Lenovo Japan Group will be the largest single computer maker in the country and will see the two work together on not just developing computers but on future tablets. Both companies will keep using their brand names on home devices but should also help Japanese companies sell hardware beyond the island and sell servers.

Smartphone development was also a possibility, Lenovo chief Yang Yuanqing added.

The deal gives Lenovo the controlling stake, with a 51 percent share, but will have NEC's Personal Products head Hideyo Takasu control the new group. Lenovo's representative director Roderick Lappin would be executive chairman. NEC's PC division will now be a subsidiary of the new group, and it will get a $175 million cash infusion from Lenovo.

The deal should be completed before the end of June.

The consolidation wasn't fully justified but is known to come from mutual interests. Lenovo should be the near overtaking Acer to become the third largest PC builder in the world and said it saw Japan, the third-largest computer market, as an opportunity to grow.

NEC meanwhile has led local sales but has had to contend with a harsh and often shrinking Japanese computer market. Most recent growth has come from foreign companies like Apple that move faster than traditionally conservative Japanese firms. The joint work on tablets is an indirect admission that Japanese manufacturers were mostly caught off-guard by the iPad and that future joint projects might be a fast track. Both Lenovo and NEC had tablets on show at CES in early January, but the Lenovo LePad is the result of a year-long delay while the NEC Cloud Communicator dual-screen tablet is still in prototype form and doesn't have a release date.